Is Azal Coffee obligated to implement or continue the marketing fund?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
ration of Marketing fund.
You must make contributions to the marketing fund as provided in Section 4.3. You acknowledge and agree that we are not obligated to implement a marketing fund or to continue a marketing fund, if implemented, and may suspend contributions to or operations of the marketing fund or terminate the marketing fund (or reinstate the marketing fund if it is terminated). We will administer and control the marketing fund in our sole discretion. We may use the marketing fund to: maximize general public recognition and patronage of the Franchise Marks and Azal Coffee Stores; formulate, develop and produce marketing, advertising, and sales support materials for use by franchisees; conduct marketing, advertising, and promotional programs on a national, regional or local level; provide marketing support services to franchisees; develop, maintain, and support the Franchise Technology and "Digital Marketing" (defined in Section 9.7) for us and/or franchisees; obtain public relations services; obtain marketing and advertising services from third parties to administer, create, distribute, place, publish, or otherwise provide marketing products and services to the marketing fund and to develop and implement Franchise Technology and Digital Marketing; pay the expenses of the marketing fund, including without limitation, salaries and other employment expenses of our marketing staff, administrative costs, overhead, and other expenses we incur in connection with the administration of the marketing fund; and other uses determined in our discretion.
We are not required to spend your marketing fund contributions to place advertising in your market or in any specific media. The marketing fund will be used to pay all expenses of the marketing fund. We will submit to you, on request, an annual report of the receipts and disbursements of the marketing fund, which may be unaudited and prepared by us.
We may expend or allocate a portion of the advertising fund that we determine on an annual basis for such reasonable salaries, administrative costs and overhead, if any, as we may incur in connection with administration of the advertising fund (which does not include separate costs of employing independent contractors or agencies to administer, create, distribute, place, publish or otherwise provide products or services to the advertising fund). The marketing fund may borrow money and pay interest or establish credit from us or other entities. Payments of principal and interest on those loans may be deducted from the marketing fund. The marketing fund will not be used for advertising that is principally a solicitation for the sale of franchises but the marketing fund may be used for ancillary or incidental uses for the solicitation or sale of franchises by us or other franchisees, including an area on our website or on print advertisements created or distributed by the marketing fund or an advertising cooperative.
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, Azal Coffee is not obligated to implement or continue a marketing fund. While franchisees are required to contribute to the marketing fund, Azal Coffee retains the discretion to suspend contributions, terminate the fund, or reinstate it if terminated. This provides Azal Coffee with significant flexibility in managing the marketing fund based on its assessment of the needs of the franchise system.
Azal Coffee has full control over the administration of the marketing fund and decides how it will be used. The FDD specifies a range of potential uses for the marketing fund, including enhancing brand recognition, developing marketing materials, conducting advertising campaigns, supporting franchisees with marketing services, developing franchise technology and digital marketing, obtaining public relations services, and covering the expenses of administering the fund. This broad discretion allows Azal Coffee to allocate resources as it sees fit to support the overall growth and development of the Azal Coffee brand.
While franchisees contribute to the marketing fund, Azal Coffee is not required to spend those contributions in any specific market or media. Franchisees must contribute up to 3% of gross sales, but currently contribute 1% of gross sales. Franchisees must pay these contributions monthly. This policy means that franchisees may not directly benefit from the marketing fund in their specific location, as Azal Coffee prioritizes the overall benefit to the franchise system. Franchisees can request an annual report of the marketing fund's receipts and disbursements, but this report may be unaudited and prepared by Azal Coffee, meaning that the franchisee has limited means to verify how the funds are spent.